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social responsibilities and managerial ethics

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social responsibilities and managerial ethics

  1. 1. 1 Chapter #3. Social Responsibility and Managerial Ethics
  2. 2. What Is Social Responsibility?  The Classical View – Management’s only social responsibility is to maximize profits (create a financial return) by operating the business in the best interests of the stockholders (owners of the corporation). – Expending the firm’s resources on doing “social good” unjustifiably increases costs that lower profits to the owners and raises prices to consumers.
  3. 3. What Is Social Responsibility? (cont’d)  The Socioeconomic View – Management’s social responsibility goes beyond making profits to include protecting and improving society’s welfare. – Corporations are not independent entities responsible only to stockholders. – Firms have a moral responsibility to larger society to become involved in social, legal, and political issues. – “To do the right thing”
  4. 4. To Whom is Management Responsible?
  5. 5. From Obligation to Responsiveness to Responsibility  Social Obligation – The obligation of a business to meet its economic and legal responsibilities and nothing more.  Social Responsiveness – The capacity of a firm to adapt to changing societal conditions through the practical decisions of its managers in responding to important social needs.  Social Responsibility – A firm’s obligations as a moral agent extends beyond its legal and economic obligations, to the pursuit of long-term goals that are good for society.
  6. 6. Does Social Responsibility Pay?  Studies appear to show a positive relationship between social involvement and the economic performance of firms. – Difficulties in defining and measuring “social responsibility” and “economic performance raise issues of validity and causation in the studies. – Mutual funds using social screening in investment decisions slightly outperformed other mutual funds.  A general conclusion is that a firm’s social actions do not harm its long-term performance.
  7. 7. The Greening of Management  The recognition of the close link between an organization’s decision and activities and its impact on the natural environment. – Global environmental problems facing managers:  Air, water, and soil pollution from toxic wastes  Global warming from greenhouse gas emissions  Natural resource depletion
  8. 8. How Organizations Go Green  Legal (of Light Green) Approach – Firms simply do what is legally required by obeying laws, rules, and regulations willingly and without legal challenge.  Market Approach – Firms respond to the preferences of their customers for environmentally friendly products.  Stakeholder Approach – Firms work to meet the environmental demands of multiple stakeholders—employees, suppliers, and the community.  Activist Approach – Firms look for ways to respect and preserve environment and be actively socially responsible.
  9. 9. Approaches to Being Green
  10. 10. Values-Based Management  Values-Based Management – An approach to managing in which managers establish and uphold an organization’s shared values.  The Purposes of Shared Values – Serving as guideposts for managerial decisions – Shaping employee behavior – Influencing the direction of marketing efforts – Building team spirit  The Bottom Line on Shared Corporate Values – An organization’s values are reflected in the decisions and actions of its employees.
  11. 11. Purposes of Shared Values
  12. 12. Stated Values of Organizations Percentage of Stated Value Respondents Customer satisfaction 77% Ethics/integrity 76% Accountability 61% Respect for others 59% Open communication 51% Profitability 49% Teamwork 47% Innovation/change 47% Continuous learning 43% Positive work environment 42% Diversity 41% Community service 38% Trust 37% Social responsibility 33% Security/safety 33% Empowerment 32% Employee job satisfaction 31% Have fun 24% Source: “AMA Corporate Values Survey, 2002
  13. 13. Managerial Ethics  Ethics Defined – The rules and principles that define right and wrong conduct.  Four Views of Ethics – The utilitarian view – The rights view – The theory of justice view – The integrative social contracts theory
  14. 14. Managerial Ethics (cont’d)  Utilitarian View – Ethical decisions are made solely on the basis of their outcomes or consequences such that the greatest good is provided for the greatest number.  Encourages efficiency and productivity and is consistent with the goal of profit maximization.  Rights View – Concerned with respecting and protecting individual liberties and privacy.  Seeks to protect individual rights of conscience, free speech, life and safety, and due process.
  15. 15. Managerial Ethics (cont’d)  The Theory of Justice – Organizational rules are enforced fairly and impartially and follow all legal rules and regulations.  Protects the interests of underrepresented stakeholders and the rights of employee.  Integrative Social Contracts Theory – Ethical decisions should be based on existing ethical norms in industries and communities in order to determine what constitutes right and wrong.  Based on integration of the general social contract and the specific contract between community members.
  16. 16. Factors That Affect Employee Ethics  Moral Development – Research Conclusions:  People proceed through the stages of moral development sequentially.  There is no guarantee of continued moral development.
  17. 17. Stages of Moral Development
  18. 18. Individual Characteristics  Personality Variables – Ego strength  A personality measure of the strength of a person’s convictions – Locus of Control  A personality attribute that measures the degree to which people believe they control their own life.  Internal locus: the belief that you control your destiny.  External locus: the belief that what happens to you is due to luck or chance.
  19. 19. Ethics in an International Context  Ethical standards are not universal. – Social and cultural differences determine acceptable behaviors.  Foreign Corrupt Practices Act – Makes it illegal to corrupt a foreign official yet “token” payments to officials are permissible when doing so is an accepted practice in that country.
  20. 20. How Managers Can Improve Ethical Behavior in An Organization 1. Hire individuals with high ethical standards. 2. Establish codes of ethics and decision rules. 3. Lead by example. 4. Delineate job goals and performance appraisal mechanisms. 5. Provide ethics training. 6. Conduct independent social audits. 7. Provide support for individuals facing ethical dilemmas.
  21. 21. Ethical Leadership  Managers must provide a good role model by: – Being ethical and honest at all times. – Telling the truth; don’t hide or manipulate information. – Admitting failure and not trying to cover it up. – Communicating shared ethical values to employees through symbols, stories, and slogans. – Rewarding employees who behave ethically and punish those who do not. – Protecting employees (whistleblowers) who bring to light unethical behaviors or raise ethical issues.
  22. 22. Corporate Social Responsibility (CSR)  Wealth maximization does not preclude the firm from being socially responsible.socially responsible.  Assume we view the firm as producing both private and social goods. 22
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  28. 28. For discussion 1. Do you think it is acceptable to give your boss a Rs 5000 gift to celebrate a birthday or holiday? – Yes or No 2. Do you think it is acceptable to accept a Rs 5000 gift from your boss to celebrate a birthday or holiday? – Yes or No
  29. 29. For discussion 3. Is there an ethical problem with using your employer's copier to make a small number of copies for personal use ( for example your child’s project, or personal correspondence)? – Yes or No 4. Is it wrong to browse the internet while at work if all your work is done and there is otherwise nothing you ought to be doing? – Yes or No
  30. 30. For discussion 5. Is it unethical to make up data to justify the introduction of a new product if, when you start to object, your boss tells you “just do it” – Yes or No

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